The New Zealand dollar pared overnight gains in local trading as investors look to the outcome, tomorrow morning, local time, of the last US Federal Reserve policy meeting of the year, which may provide guidance on the US central bank's plans to start lifting American interest rates.
The kiwi fell to 77.36 US cents at 5pm in Wellington from 77.85 cents at 8am, little changed from 77.45 cents yesterday. The trade-weighted index fell to 77.68 in its first day under an expanded basked of currencies, from 77.90 yesterday.
Investors have been rallying to the greenback through the latter half of this year as an improving US economy stokes expectations the Fed will move away from the zero interest rate policy it's been running since the global financial crisis. The Federal Open Market Committee reviews policy on Wednesday in Washington, and traders anticipate chair Janet Yellen will give a clearer outline on the Fed's plans to start raising rates next year and what she sees as the major risks facing the US.
"The market's looking for a pretty quiet end to the month once we get through the FOMC. There's a little bit of GDP data and that might be it," said Mark Johnson, senior dealer foreign exchange at OMF in Wellington. He said the recent unwinding of long US dollar positions doesn't mean the greenback's appreciation is over.
"The question is 'what is Yellen going to say tomorrow?' Is she concerned the US dollar is strengthening too quickly?"
